Benefits of Dunning Management of Payments
Dunning is a system used by providers to ensure that
payments are made on time. Communication methods with the consumer can evolve
over time, from gentle reminders to notices threatening legal action.
Dunning Meaning
Dunning processes entail communicating with customers in
order to collect accounts receivable or money owed for a good or service on
time. The term "dun" was first used as a verb to coordinate debt
collection in the 1600s. People can pay for goods and services with a check,
cash, or credit card. When providers receive insufficient or incomplete funds,
they send dunning letters. Automatic dunning management programs can detect
failed transactions caused by network issues or expired payment methods and
send digital reminders.
Historically, businesses would send dunning letters to
consumers to remind them of late payments, prompting more retries as time
passed and the payment became later. A few formal letters were followed by
in-person visits from a collection agency, which occasionally threatened legal
action. Chatbots, phone calls, and emails are used in more modern practices.
The process's goal remains consistent: to collect unpaid debts through
escalating communication techniques.
How Does the Dunning Procedure Work?
When customers purchase a product or service, they may only
pay a portion of the cost. This means that the consumer will owe money on a
payment plan, and the provider has the right to demand payment if they do not
stick to the schedule. Many providers now communicate late or failed payments
using automated processes.
Subscription and membership-based services typically require
a single payment method, usually a credit card, to charge the customer on a
regular basis. Failed payments can be flagged by dunning software programs due
to incorrect credit card information, expired forms of payment, or insufficient
funds. Dunning programs can send automated emails to customers informing them
of payment failures and initiating payment retries to make the process easier.
3 Benefits of Using a Dunning Management System
Using an automatic dunning system can have advantages.
Consider the following benefits:
1. Better customer experience: Communication is essential
for a positive customer experience. Payment reminders sent before the due date
can help reduce payment failures and boost customer satisfaction.
2. Increased revenue: Dunning management programs typically
include the ability to automatically retry failed payments. This procedure can
keep revenue from declining as a result of technological issues.
3. Reduced involuntary churn: Involuntary churn due to
failed payments can be detrimental to the business model for subscription-based
services. Payment processors can be notified of billing issues by Dunning
management systems, preventing service interruption and increasing customer
retention.
